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The Foreclosure Crisis Essay

1102 words - 5 pages

Since I do not have a mortgage to foreclose, I know about it because I have heard my parents discussing it and I have seen clippings in the newspapers as well as on the television. Now the school is evoking thoughts, and I am encouraged to perform cursory research and present my best thoughts as my recommendations for solving the foreclosure crisis.

Every one has been talking about the stimulus and the Obama’s plan to avert foreclosures. But it seems that the program is designed for failures. It is said that if one fails to plan, then the plan must be, to fail! The economy right now is still on a negative or down slide – continued lay-offs, reduction in work hours, no cost of ...view middle of the document...

So what is this foreclosure crisis all about?
Mortgage foreclosure has become one of the major contributing factors to the downfall of the U.S. economy. The rise in mortgage foreclosure began due to subprime lending practices. The rise in mortgage foreclosure began due to subprime lending practices. Housing prices were overinflated and borrowers were allowed to purchase homes they could not afford.

"Did anyone know that the housing market was going to collapse?" Not hardly, and if someone did, no one was told, and now all persons are effected. This is a question that no one seems to be able to answer, not even the experts, less this budding college student!

All said and done, one must ask, what is the cause of the foreclosure crisis? Foreclosure is the resultant effect of the inability of persons living in financed (mortgage) homes, are unable to timely repay their agreed monthly mortgage payment, which include the interest income. With no revenues (interest income) come in form of mortgage payments, the bank is unable to meet it obligations (interest to it depositors); and the banks are now forced to take back the homes. This action of initiating taking back is called foreclosure.


Then how do we solve it?

The advent of the Obama’s plans and the federal stimulus is a false-positive in the solution of the foreclosure crisis. Rather it should be re-labeled “bait-and-switch” because the net effect to the foreclosure crisis is a fat zero (0); and actually, at most time a cost and loss to the issue!

It is not sufficient to merely identify issues related to the foreclosure crisis, but what is more important is, what has to be done to avert or solve these problems!

As previously stated, the foreclosures have had many impacts extending beyond the loss of the home for borrowers, lenders, investors, and the wider economy. The next part of the discussion focuses on these impacts. One of these impacts is the decreased ability of borrowers to receive certain types of loans.

Initially, the foreclosure crisis hit low-income neighborhoods disproportionately.1 Foreclosures remain concentrated in these neighborhoods. But in recent months, the foreclosure epidemic has spread more deeply into higher-income neighborhoods. These higher-income neighborhoods have not been...

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